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Prices still rise slowly in China (SEB Bank)

Kinijoje kainos vis dar auga lėtai (SEB bankas)

In China, inflation remains barely positive. In June, prices grew by only 0.2 percent year-on-year. and indicates that the deflationary pressure in the country is still not receding. Looking at the producer price index (PPI), the situation is even worse – the annual change has been negative for almost 2 years.

Such indicators strengthen market participants' belief that China's central bank will have to take stimulus measures. Bloomberg expects China's one-year interest rate to be cut by 0.1 percent in September. Today, China's major stock indexes are marginally bearish, with only minimal gains set for the full year 2024.

The latest data released this morning indicate that inflation in Norway is slowing faster than expected. Inflation in the country fell to 2.6 percent, although markets had expected price growth to hold steady at 3 percent. Inflation in Norway has long been higher than its neighbors, but recent data showing slower price growth than the central bank had expected could raise expectations for a rate cut this year.

In the markets, Tuesday was like a continuation of Monday. In France, the reverberations of the elections are not silent and shares fell (CAC 40 -1.6%), while European markets followed suit (STOXX 600 -0.9%). While Emmanuel Macron considers what to propose for the post of prime minister, former French prime minister Edouard Philippe is seeking to form a centre-right coalition. Although such a merger would not be enough for a majority, it would be enough to form the largest bloc in parliament. The former prime minister says that such a decision will not form a coalition, but it would be a technical agreement to make decisions in the country for at least a year. US markets managed to squeeze out another record high, but the main indexes rose minimally. The head of the Fed, Jerome Powell, emphasized yesterday in the Capitol that the labor market is weakening and high inflation is not the only problem that the central bank is monitoring. Of course, Mr. Powell continued to speak very cautiously about possible interest rate cuts, so the markets could not calibrate their expectations and continue to expect the first reduction in September.

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